The following discussion should be read in conjunction with our audited
financial statements and the related notes that appear elsewhere in this
quarterly report. The following discussion contains forward-looking statements
that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include those discussed below and
elsewhere in this quarterly report.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
other Federal securities laws and is subject to the safe-harbor created by such
Act and laws. Forward-looking statements may include statements regarding our
goals, beliefs, strategies, objectives, plans, including product and technology
developments, future financial conditions, results or projections or current
expectations These forward-looking statements involve known or unknown risks,
uncertainties and other factors that may cause the actual results, performance,
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may," "should," "potential," "continue," "expects,"
"anticipates," "intends," "plans," "believes," "estimates," and similar
expressions. These statements are based on our current beliefs, expectations,
and assumptions and are subject to a number of risks and uncertainties. Although
we believe that the expectations reflected-in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Our actual results may differ materially from those anticipated
in these forward-looking statements. These forward-looking statements are made
as of the date of this report, and we assume no obligation to update these
forward-looking statements whether as a result of new information, future
events, or otherwise, other than as required by law. In light of these
assumptions, risks, and uncertainties, the forward-looking events discussed in
this report might not occur and actual results and events may vary significantly
from those discussed in the forward-looking statements.
Implications of Being an Emerging Growth Company
Emerging Growth Company - We are an emerging growth company as defined in
Section 2(a)(19) of the Securities Act of 1933, as amended, or the Securities
Act. We will continue to be an emerging growth company until: (i) the last day
of our fiscal year during which we had total annual gross revenues of at least
$1.07 billion; (ii) the last day of our fiscal year following the fifth
anniversary of the date of the first sale of our common stock pursuant to an
effective registration statement under the Securities Act; (iii) the date on
which we have, during the previous 3-year period, issued more than $1.0 billion
in non-convertible debt; or (iv) the date on which we are deemed to be a large
accelerated filer, as defined in Section 12b-2 of the Securities Exchange Act of
1934, as amended, or the Exchange Act, which means the market value of our
common stock that is held by non-affiliates exceeds $700 million as of the prior
June 30.
As an emerging growth company, we are exempt from:
? Sections 14A(a) and (b) of the Exchange Act, which require companies to
hold stockholder advisory votes on executive compensation and golden
parachute compensation;
? The requirement to provide, in any registration statement, periodic report
or other report to be filed with the Securities and Exchange Commission,
or the "Commission" or "SEC", certain modified executive compensation
disclosure under Item 402 of Regulation S-K or selected financial data
under Item 301 of Regulation S-K for any period before the earliest
audited period presented in our initial registration statement;
? Compliance with new or revised accounting standards until those standards
are applicable to private companies;
? The requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002, or
the Sarbanes-Oxley Act, to provide auditor attestation of our internal
controls and procedures; and
? Any Public Company Accounting Oversight Board, or "PCAOB", rules regarding
mandatory audit firm rotation or an expanded auditor report, and any other
PCAOB rules subsequently adopted unless the Commission determines the new
rules are necessary for protecting the public.
We have elected to use the extended transition period for complying with new or
revised accounting standards under Section 102(b)(1) of the Jumpstart Our
Business Startups Act.
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We are also a smaller reporting company as defined in Rule 12b-2 of the Exchange
Act. As a smaller reporting company, we are not required to provide selected
financial data pursuant to Item 301 of Regulation S-K, nor are we required to
comply with the auditor attestation requirements of Section 404(b) of the
Sarbanes-Oxley Act of 2002. We are also permitted to provide certain modified
executive compensation disclosure under Item 402 of Regulation S-K.
Company Overview
Globe Net Wireless Corp. was incorporated under the laws of the State of Nevada,
U.S. on September 4, 2009. Our registration statement on Form S-1 was filed with
the Securities and Exchange Commission was declared effective on May 15, 2013.
On August 19th, 2021, the Company entered into a Merger Agreement with Stemtech
Corporation by which the Company acquired one hundred percent of the shares of
STEMTECH CORPORATION in exchange for the issuance of 37,060,000 shares of the
Company, approximately 85% of the issued and outstanding shares of the company.
Stemtech has pioneered and patented a whole new category of dietary supplements.
Stemtech's advanced Stem Cell Nutrition formulations are one-of-a-kind natural
products designed to help support the three most important aspects of stem cell
physiology: 1) Releasing more stem cells; 2) their circulation in the blood; and
3) Migration into tissues, where they can perform their daily function of
renewal and rejuvenation for optimal health. We actually harness the incredible
power of adult stem cells. How does this work? Adult stem cells are released
from your bone marrow into the bloodstream, they then Circulate in the
bloodstream and flow to the tissues most in need. As they arrive, the adult stem
cells migrate into the tissues, reproduce and become new, healthy cells of those
tissues. This process takes place every single day, even without tissue damage,
as part of the natural renewal system of the body. It is important to understand
that Stemtech's products do not contain stem cells. They are composed of natural
botanicals and other ingredients that have been clinically documented to support
the performance of your own adult stem cells.
While sales of product obviously create the cash flow, our real business model
is not just "sales", but lateral penetration. We do this through our IBPs -
"Independent Business Partner" Sales Forces, and we invest much energy in
growing our IBPs. Post public listing and funding, Stemtech is projecting the
addition of 30,000 new independent business partner reps over the next 12 to 24
months, adding to the existing IBPs. With an enhanced compensation plan, IBPs
will be even more incentivized to build their network, attracting additional
industry leaders. IBPs are a testimonial to our product and business model,
lowering our customer acquisition costs.
In order to grow our company's IBPs post pandemic, we are now reinstituting
in-person meetings, contests such as a travel incentive which began August 1 for
trip to Cancun in December, cruises, Business Academies for Training, regional
conferences, our Annual Convention with new product launches. Our IBPs offer
highly flexible yet steady income which is most adapted to todays "Laptop &
Cellphone Lifestyle", with structured and organized weekly corporate training
calls, a personalized website, back-office tracking, oversight and management
Tools, Reports, Training Materials and Social Media Sharing. Stemtech announced
on July 25th the partnering with industry leading VERB TECHNOLOGY in launching
Interactive Video and Livestreaming Sales Enablement Apps to strengthen the
direct sales channel. The new mobile app, "Stemtech Advance Office" is based on
the VERB leading-edge platform which enables IBPs to share recruiting materials
and track prospective members. This was launch in launched in Q3.
Stemtech launched a new marketing program in January, 2022, and our sales
continue to come from returning consumers who believe in the quality products,
as well as new members. Until September 2021, the Company had operated on an
extremely tight budget, with inadequate working capital and difficulties
fulfilling orders. Since the cash infusions noted in "Financing" infra, the
company now has the resources to contact and re-engage the over 200,000 former
distributors. With this new cash infusion, the Company has engaged experienced
marketing and social media professionals to initiate new marketing strategies
which are expected to bring increased activity. Moreover, we are now better
positioned to absorb significant new clientele either as product consumers or
business builders, as the company has directed significant cash towards our
inventory and marketing efforts. Management conservatively believes that given
the cash on hand and working expenditures as describe above, we can reinvigorate
sales to be more consistent with the company's previous revenue historically, as
we were recognized 4 separate years in the Inc 5000 Magazine's list of fastest
growing companies.
The network marketing industry companies are known for their potential explosive
growth and with more network marketers looking for a new home, Stemtech is well
positioned. With our legacy of being in business for over 16 years, industry
experience, and scientific knowledge, with products in the expanding stem cell
nutrition market, our strong and profitable compensation plan for our Field, we
are set to enter the typically invigorated end of Q3 and Q4 period with much
anticipated growth. Management believes that the highest growth is upcoming in
the next two to three years. General economic conditions with inflation
factoring largely in today's market, people are looking for an income-earning
opportunity. Being their own boss and working while enjoying a desired
lifestyle. Quality of life issues are in the IBPs control. Combined with
Stemtech's patented anti-aging and longevity products, it is inevitable that a
momentum phase will propel the company to achieve our projections.
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Stemtech is working to add new products in the stem cell arena. Forecasts for
the stem cell industry, whether stem cell therapy, stem cell pharma, stem cell
technology or stem cell nutrition, are indicating explosive growth between 2022
and 2026, reaching estimated business volumes of USD $26 billion with a CAGR of
10.34 percent, according to "Research and Markets" a recognized industry
publication and authority. As the pioneer in stem cell nutrition since 2005,
Stemtech's growth opportunities are significant.
Below this IBP level, we have our "DTC" (Direct-To-Consumer) network marketing
Distribution model. This integrative model allows us an immediate global
presence and ability to operate in multiple countries on any continent. We are
uniquely positioned in this post pandemic economy beset by supply chain issues,
as this method requires no up-front or required buy-in of inventory, with
monthly shipments available for known recurring sales. This platform has us now
operating at the intersection of the ecommerce economy, social economy and gig
economy.
RESULTS OF OPERATIONS
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation. We expect we
will require additional capital to meet our long-term operating requirements. We
expect to raise additional capital through, among other things, the sale of
equity or debt securities.
Three-Month Period Ended September 30, 2022 Compared to the Three-Month Period
Ended September 30, 2021.
During the three months ending September 30, 2022 net sales were $1,047,030
versus $907,854 the year earlier period, for a positive variance of $139,176 or
15.3%. This variance is due to increase IBPs and an increase in prices.
Management anticipates revenues to continue to increase as the Company invests
in new tools for its IBPs and seeks to increase the number of IBPs, however
current economic risks of recession can influence this which is beyond the
Company's control.
During the three months ending September 30, 2022, cost of goods sold was
$180,599 versus $126,432 the year earlier period, for a negative variance of
$54,167 or 42.8%. This variance is line with the increase in sales during the
period.
During the three months ended September 30, 2022, commissions expenses were
$306,293 versus $133,492 the year earlier period, for a negative variance of
$172,801, or 129.45%. The variance is in line with increased sales and that the
Company has increased the global payout to its IBP channel.
During the three months ended September 30, 2022, general and administrative
expenses were $3,822,131 versus $1,290,374 the year earlier, for a negative
variance of $2,531,757, or 196.2%. The increase is primarily due to hiring of
consultants, increase costs relating to meet regulatory reporting and fees as
well as the issuance of Stock-based compensation estimated at $2,808,111.
During the three months ended September 30, 2022, selling and marketing expenses
were $120,434 versus $93,316 the year earlier, for a negative variance of
$27,118, or 29.1%. The increase is primarily due to an overall increase in
marketing spend as the Company seeks to continue to increase in its business
channel to grow revenues.
During the three months ended September 30, 2022, total operating expenses were
$4,248,858 versus $1,517,182 a year earlier, for a negative variance of
$2,731,676, or 180.1%. The increase in operating expenses was caused by the
factors described above.
During the three months ending September 30, 2022, total non-operating
activities was a gain of $20,768,637 versus an expense of $4,583,892 a year
earlier, for a positive variance $25,352,529 or 553.1%. The difference is
primarily due to $18,229,093 gain from change in fair value of derivative
liabilities, $4,237,647gain on extinguishment of debt offset by $1,833,912 in
interest expense on notes payable.
The net gain attributable to Stemtech for the three months ended September 30,
2022 and 2021, was $17,416,917 versus a loss of $5,309,768 the prior period. The
positive variance was caused by the factors described above.
17
Nine-Month Period Ended September 30, 2022 Compared to the Nine-Month Period
Ended September 30, 2021.
During the nine months ending September 30, 2022, net sales were $3,472,762
versus 3,008,727 a year early, for a positive variance of $471,035, or 15.7%.
This variance is due to increase IBPs and increase in prices due to costs
increases related to inflation, however current economic risks of recession can
influence this.
During the nine months ending September 30, 2022, cost of goods sold was
$836,409 versus $575,740, for a negative variance of $260,669 or 45.3%. This
variance is line with the increase in sales during the period.
During the nine months ended September 30, 2022, commissions expenses was
$761,345 versus $375,074 a year earlier, for a negative variance of $386,271, or
103.0%. The variance is in line with increased sales and that the Company has
increased the global payout to its IBP channel.
During the nine months ended September 30, 2022, general and administrative
expenses was $6,073,133 versus $3,142,700 a year earlier, for a negative
variance of $2,930,433, or 93.3%. The increase is primarily due to hiring of
consultants, increase costs relating to meet regulatory reporting and fees as
well as the issuance of Stock-based compensation estimated at $2,836,111.
During the nine months ended September 30, 2022, selling and marketing expenses
were $400,018 and $304,276 a year earlier, for a negative variance of $95,742,
or 31.47%. The increase is primarily due to an overall increase in marketing
spend as the Company seeks to continue to increase in its business channel to
grow revenues.
During the nine months ended September 30, 2022, total operating expenses were
$7,234,496 versus $3,822,050 a year earlier, for a negative variance of
$3,412,446, or 89.3%. The increase in operating expenses was caused by the
factors described above.
During the nine months ended September 30, 2022, total non-operating expenses
were $3,499,953 versus $4,873,891 a year earlier, for a positive variance of
$1,373,938, or 28.2%. The difference is primarily due to a loss of $4,112,023
from change in fair value of derivative liabilities, and $3,004,928 in interest
expense offset by a gain on the extinguishment of debt in the amount of
$3,358,841 and approximately $250,000 gain on forgiveness of PPP Loan.
It should be noted that the significant movement in the derivative liability and
gain on extinguishment of debt is due to the fact that the convertible notes
payable and the warrants is greatly affected by the change in the stock price
and are generally does not affect the cash position of the Company as the
greater this amount is the more likely the lenders will convert their
convertible notes payable and exercise their warrants and thus provide a cash
infusion.
The net loss attributable to Stemtech for the nine months ended September 30,
2022, was $8,026,062 versus $6,237,957 a year earlier. The increase in net loss
was caused by the factors described above.
Liquidity and Capital Resources
We are not currently profitable, and we cannot provide any assurance of when we
will be profitable. We incurred a net loss of $8,091,096 for the nine months
ended September 30, 2022 versus $6,237,957 a year earlier. During the nine
months ended September 30, 2022, we met our short-term liquidity requirements
from the issuance of notes payable, stock issuances and our existing cash
reserves.
As of September 30, 2022, our current assets were $599,693 compared to
$1,600,039 in current assets at December 31, 2021. As of September 30, 2022, our
current liabilities were $8,995,077 compared to $9,387,038 at December 31, 2021.
Current liabilities at September 30, 2022 were comprised of $3,433,405 of
derivative liabilities, $3,868,164 of accounts payable and accrued expenses,
$1,391,506 in notes payable, net of discount, $239,986 in factoring liability
and $62,018 in current operating lease liabilities.
The derivative liability and associated loss from its change in fair value are
noncash items and fluctuate due to our stock price. If the warrants are
exercised and the notes are converted, it would cause the Company to record a
gain on extinguishment of debt and Shareholders' Equity would increase
accordingly.
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Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the
nine-months ending September 30, 2022, net cash flows used in operating
activities were $976,150 which is primarily due the net loss of $8,091,096
offset by approximately $6,444,000 of noncash items as well as the changes in
working capital accounts. The noncash items primarily consist of a $4,112,025
loss from the change in fair value of derivative liabilities, $2,400,670
amortization of debt discount, $2,836,111 of stock based compensation, $330,169
of depreciation and amortization, and a partial offset by the $3,358,842 of gain
on extinguishment of debt and $250,825 gain on forgiveness of the PPP Loan.
Adjustments for changes in operating assets and liabilities were due to an
increase in inventories of $254,608 and accounts payable and accrued expenses of
$406,600.
Cash Flows from Financing Activities
We have financed our operations primarily from the issuance of notes payable.
For the nine-month period ended September 30, 2022, $514,697 cash provided from
financing activities consist of $341,939 of issuance of notes payable and net
proceeds from financing arrangements of $239,986. For the nine months ended June
30, 2021, net cash flows provided by financing activities were $2,104,410 from
proceeds of notes payable.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through a
combination of our existing funds and further issuances of securities. Our
existing working capital, further advances and debt instruments, and anticipated
cash flow are expected to be adequate to fund our operations over the next three
months. We have no lines of credit or other bank financing arrangements.
Generally, we have financed operations to date through the proceeds of the
private placement of equity and debt instruments. In connection with our
business plan, management anticipates additional increases in operating expenses
and capital expenditures relating to: (i) acquisition of inventory; (ii)
developmental expenses associated with a start-up business; and (iii) marketing
expenses. We intend to finance these expenses with further issuances of
securities and director loans. Thereafter, we expect we will need to raise
additional capital and generate revenues to meet long-term operating
requirements. Additional issuances of equity or convertible debt securities will
result in dilution to our current shareholders. Further, such securities might
have rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations. We
will have to raise additional funds in the next twelve months in order to
sustain and expand our operations. We currently do not have a specific plan of
how we will obtain such funding; however, we anticipate that additional funding
will be in the form of equity financing from the sale of our common stock. We
have and will continue to seek to obtain short-term loans from our directors,
although no future arrangement for additional loans has been made. We do not
have any agreements with our directors concerning these loans. We do not have
any arrangements in place for any future equity financing.
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
("U.S. GAAP") for interim financial statement presentation and in accordance
with Form 10-Q. Accordingly, they do not include all of the information and
footnotes required in annual financial statements. In the opinion of management,
the unaudited condensed financial statements contain all adjustments (consisting
only of normal recurring accruals) necessary to present fairly the financial
position and results of operations and cash flows. The results of operations
presented are not necessarily indicative of the results to be expected for any
other interim period or for the entire year.
Off-Balance Sheet Arrangements
As of the date of this report, we do not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
19
Stockholders' Equity (Deficit)
Authorized Shares
The Company is authorized to issue up to 200,000,000 shares of common stock, par
value $0.001 par value. Each outstanding share of common stock entitles the
holder to one vote per share on all matters submitted to a stockholder vote. All
shares of common stock are non-assessable and non-cumulative, with no
pre-emptive rights.
Commitments and Contingencies
None.
Financing
On September 3rd, 2021, the Company executed a Convertible Promissory Note,
Securities Purchase Agreement and ancillary agreements (collectively, the
"Agreements") with Leonite Capital, LLC ("Leonite"). Per the terms of the
Agreements with, the Company was tendered $410,000, which is open with right of
redemption for one year. Prior to the maturity date of the Note, the Company at
its option, has the right to redeem in cash in part or in whole, the amounts
outstanding. Should the Fund wish to convert this debt into equity, the
conversion price shall be sixty-five percent of the lowest Intraday price during
the previous 21 days. Pursuant to the Agreements, the Company has earmarked the
net proceeds for immediate cash infusion for normative working capital purposes
and capital expenditures. Leonite has agreed that neither it nor any of its
affiliates shall engage in any short-selling or hedging of our Common Stock at
any time.
On September 3rd, 2021, the Company finalized a Promissory Convertible Note,
Securities Purchase Agreement and ancillary agreements (collectively, the
"Agreements") with MCUS LLC. ("MCUS"). Per the terms of the Agreements with
MCUS, the Company was tendered $500,000, which the Company utilizes for
normative working capital purposes and capital expenditures. The Note is open
with right of redemption for nine months. MCUS has agreed that neither it nor
any of its affiliates shall engage in any short-selling or hedging of our Common
Stock during any time during the term of the Agreements. Pursuant to the
Agreements, the Company is required to register all shares which the Leonite may
acquire. The foregoing is a summary description of certain terms of the
Agreements. For a full description of all terms, please refer to the original
Agreements which were filed as an 8K with the SEC on September 10th, 2021.
On September 17th, 2021, the Company finalized a $1,400,000 investment into our
Company with Sharing Services Global Corporation, a publicly traded company
("SHRG") via a Convertible Promissory Note, a Share Purchase Agreement and
Warrant Agreement. Per the terms of the Agreements, the Company was tendered the
full $1,400,0000, which is open with right of redemption at 10% interest per
annum until September 9th, 2024. Should the holder prefer to have its debt
converted, the conversion rate shall be based on the 30-day VWAP from 8/20/21 to
9/20/21, which is $3.2431.
20
We will require additional financing to implement our business plan, which may
include joint venture projects and debt or equity financings. The nature of this
enterprise and constraint of positive cash flow places debt financing beyond the
credit-worthiness required by most banks or typical investors of corporate debt
until such time as an economically viable profits and losses can be
demonstrated. Therefore, any debt financing of our activities may be costly and
result in substantial dilution to our stockholders.
Future financing through equity investments is likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for our new investors. Newly issued
securities may include preferences, superior voting rights, and the issuance of
warrants or other derivative securities, which may have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital and
financing, including investment banking fees, legal fees, accounting fees, and
other costs. We may also be required to recognize non-cash expenses in
connection with certain securities we may issue, such as convertible notes and
warrants, which will adversely impact our financial condition.
Our ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the nutraceutical industry,
which could impact the availability or cost of future financings. If the amount
of capital we are able to raise from financing activities, together with our
revenue from operations, is not sufficient to satisfy our capital needs, even to
the extent that we reduce our operations accordingly, we may be required to
cease operations.
There is no assurance that we will be able to obtain financing on terms
satisfactory to us, or at all. We do not have any arrangements in place for any
future financing. If we are unable to secure additional funding, we may cease or
suspend operations. We have no plans, arrangements or contingencies in place in
the event that we cease operations.
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STEMTECH CORPORATION 
